Effectiveness of Monetary Policy in Controlling Inflation in Pakistan

The objective of the study is to examine the role of monetary policy to control inflation and boost economic growth in Pakistan during the period of 1970 to 2010. The results show that there is a long-run equilibrium among inflation, money supply and GDP. In addition, the results indicate that monetary policy is a powerful tool in order to control inflation in Pakistan. The important policy implication is that inflation in Pakistan can be cured by sufficiently tight monetary policy coupled with low scale borrowing by government from financial institution. At the same time economic growth requires to be sustained.